Are regulators holding mobile money back in South Africa?

The potential of mobile money for the unbanked is well reported. In countries such as Kenya, Tanzania and Zimbabwe mobile money services have become a part of every day life. What is it that makes these services a success while other deployments fail to take off?

An article on South African site, Tech Central this week examined the state mobile money in South Africa, and posed the question, ‘Are regulations the key to a successful service?’

“So, with such game-changing developments happening on our doorstep, the question for South Africa is: why are we so far behind? A number of attempts to launch mobile payments solutions have failed (including Vodacom’s M-Pesa), although recently both Vodacom and MTN have re-launched their services.

It is often pointed out that South Africa has a much more sophisticated financial system than other African markets and more people already have access to financial services …

Another area that is often cited as holding back developments in South Africa is its rigid regulatory framework. Mobile money proponents cite the flexible approach of the Central Bank of Kenya as a key success factor for M-Pesa. There is no denying that the South African regime is harder to navigate for new entrants.”

Is it necessary to hold a mobile money service to the same regulatory requirements as a bank?

“This approach is unnecessarily stringent and stifles innovation and disruption which would benefit consumers, especially the poor. In fact, mobile payments introduce very little risk into the payment system as the funds sent by customers are typically held in a trust account and not invested or on-lent by the mobile operators as would be done by a bank.”

Indeed the GSMA MMU group have been campaigning for more enabling regulatory frameworks for some time. In their 2014 SOTIR publication they identified regulatory hurdles as one of two key barriers to mobile money deployments.

“An increasing number of regulators are recognising the major role mobile money services can play in fostering financial inclusion and economic growth and are establishing enabling regulatory frameworks for mobile money.6 New regulation has been passed in Colombia, Kenya, India and Liberia this year. Today, in 47 out of 89 markets where mobile money is available, regulation allows both banks and non-banks to provide mobile money services in a sustainable way.
It is critical that regulators create an open and level playing field for mobile money services, as there is evidence that regulatory barriers can slow down both market uptake and customer adoption.”